Filed bankruptcy and death benefits in bank account, was levied by trustee, how can funds be returned? Is it legal?

The exemption in bankruptcy are determined by which state you live in. These laws tell you what you can keep and protect from your creditors and the trustee in bankruptcy. You must properly claim exemptions to which you are entitled. Here in Colorado, there is no exemption for death benefits and there is no wildcard exemption that might protect some or all of any funds in a bank account. If you filed with an attorney you should discuss this with him or her. If you filed on your own without the benefit of legal counsel this may end up being a very costly mistake. Surely a legal fee would have been worth it to protect what little you may have had in the way if assets.

Did you disclose these benefits in your bankruptcy schedules and claim them as exempt? You can't expect an exemption for something you didn't disclose. If you did disclose and exempt this, you may litigate this issue before the bankruptcy judge.

Where are the death benefits from? To get the money you will have to find an exemption that covers that asset, and amend your Schedule C to claim the exemption and try to get the money back from the trustee.

Assuming you filed a chapter 7 bankruptcy any proceeds from a life insurance policy in a bank account belong to the chapter 7 Trustee. Why wouldn't they? Even if you received proceeds from a life insurance policy after filing a bankruptcy case, within the first 180 days after filing if you become entitled to life insurance proceeds they belong to the Trustee. Am I missing something?